China activates anti-sanctions law for the first time, orders non-compliance with US penalties

On May 3, 2026, China's Ministry of Commerce issued a formal 'prohibition' ordering citizens and businesses not to comply with US sanctions imposed on five Chinese 'teapot' refineries—small, independent oil processors that Washington accuses of links to Iranian oil.

This marks the first time since it took effect in 2021 that China has formally invoked its law officially titled 'Rules on Counteracting the Unjustified Extra-territorial Application of Foreign Legislation and Other Measures,' commonly referred to as the anti-sanctions law, to oppose what Beijing considers unjust US 'long-arm jurisdiction.'

The Commerce Ministry order states that US sanctions against Hengli Petrochemical (Dalian) and four other refineries 'shall not be recognized, enforced, or complied with.' The ministry argues the sanctions 'inappropriately restrict' normal trade and business activities, violate international law, and infringe upon China's sovereignty, security, and development interests.

How China's anti-sanctions law works

Under the rules, Chinese citizens and organizations whose business activities are restricted by foreign law must report to the Ministry of Commerce within 30 days. Failure to report may result in penalties such as warnings or fines.

After a 30-day review period, if the ministry determines that a business or individual is subject to 'unjustified extraterritorial application,' it may issue an order prohibiting compliance with the foreign law. Businesses harmed by another party's compliance with foreign sanctions can sue for compensation in court and, in some cases, receive government support.

Dr. Naimeh Masumy, a PhD researcher at Maastricht University in the Netherlands who studies China's anti-sanctions measures, said: 'Previously, China mostly relied on diplomatic protests and informal pressure. Formalizing this resistance into law shows Beijing views US sanctions as a systemic, long-term challenge requiring a structural legal response, rather than just case-by-case reactions.'

Significance of the move

Expert Dominic Chiu at Eurasia Group analyzed: 'This move signals Beijing is taking a more assertive approach to counter-sanctions. They are demonstrating a lower threshold for deploying legal and regulatory tools to oppose US sanctions.'

Analysts say the order could put businesses in a difficult position facing pressure from both Washington and Beijing. Most companies with significant exposure to the US market, dollar transactions, or ties to US banks will likely prioritize compliance with US sanctions because consequences from Washington are usually more immediate and severe. Conversely, state-owned enterprises or companies focused heavily on the Chinese market are more likely to comply with Beijing's prohibition.

While Chinese state media hailed the move as 'a practical example for the international community to oppose unilateral bullying,' some experts like Chiu expressed doubt about the feasibility of this model for countries like Iran or Russia—nations already cut off from the US financial system, making domestic prohibitions less meaningful in practice.